Canada’s benchmark stock index ended off its lows of the day Friday, but still in negative territory, as losses in the heavyweight energy, financials and materials sectors weighed on market performance. For the month, the TSX posted a gain - albeit a modest one of just over one-half of one percentage point.
The S&P/TSX Composite Index ended at 20,287.80, a drop of 0.12% from Thursday’s record high close, or 23.98 points. Energy, financials and materials fell 0.89%, 0.60%, and 0.09%, respectively.
Most other sectors were higher, including telecom stocks. An auction for highly coveted 5G airwaves netted a record-breaking $8.91-billion for the federal government, with Canada’s Big Three telecoms shelling out a combined $7.35-billion, it was announced late Thursday. While the auction drew bids much higher than the Street first anticipated, the dollar figure was inline with what was reported in the Globe and Mail earlier this month, which limited any negative reaction in the telecom stocks.
In economic news, the Canadian economy appears to have bounced back after its worst two-month stretch since the start of the pandemic, eking out a gain in June and growth in the second quarter of the year.
Statistics Canada said its preliminary estimate is that real gross domestic product grew at an annualized rate of 2.5 per cent between April and June, buttressed by a 0.7 per cent rise in June as pandemic restrictions eased following declines of 0.5 per cent in April and 0.3 per cent in May.
The decline in May put total economic activity about two per cent below pre-pandemic levels seen in February 2020. The agency said that with growth in June, total economic activity was about one per cent below pre-pandemic levels.
On Wall Street, U.S. stocks fell on Friday and registered losses for the week as Amazon.com shares dropped after the company forecast lower sales growth, but the S&P 500 still notched a sixth straight month of gains.
Amazon.com Inc shares sank 7.6% - their biggest daily percentage drop since May 2020 - after the company reported late on Thursday revenue for the second quarter that was shy of analysts’ average estimate and said sales growth would ease in the next few quarters as customers ventured more outside the home.
Shares of other internet and tech giants that did well during the lockdowns of last year, including Google parent Alphabet Inc and Facebook Inc, were mostly lower as well.
“Overall earnings have been good. But Amazon ... and some of last year’s winners are taking some of the air out of the market today,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “This market has been driven by big tech and when tech does well, the market seems to go right along with it, and when it doesn’t,” it falls.
Data on Friday showed U.S. consumer spending rose more than expected in June, although annual inflation accelerated further above the Federal Reserve’s 2% target.
The Dow Jones Industrial Average fell 149.06 points, or 0.42%, to 34,935.47, the S&P 500 lost 23.89 points, or 0.54%, to 4,395.26 and the Nasdaq Composite dropped 105.59 points, or 0.71%, to 14,672.68.
For the month, the S&P 500 rose 2.3%, the Dow gained 1.3% and the Nasdaq added 1.2%, while for the week all three of the major indexes posted declines.
Strong earnings and the continued rebound in the U.S. economy have helped to support stocks this month, but the rapid spread of the Delta variant of the coronavirus and rising inflation have been concerns.
“There are still some distant jitters, whispers about the Delta variant, about cases rising, and I think some underlying worries about a slowdown of the reopenings and possible reversal,” Dollarhide said.
Also on the earnings front, Pampers maker Procter & Gamble Co rose 2% as it forecast higher core earnings for this year, and U.S.-listed shares of Canada’s Restaurant Brands International Inc jumped 5.1% after the Burger King owner beat estimates for quarterly profit.
S&P 500 company results on the quarter overall have been much stronger than expected, with about 89% of the nearly 300 reports so far beating analysts’ profit estimates, according to IBES data from Refinitiv. Earnings are now expected to have climbed 89.8% in the second quarter versus forecasts of 65.4% at the start of July.
U.S. Treasury yields fell on Friday, as softer-than-expected inflation data fed the view that the Federal Reserve could delay its exit from quantitative easing, while investors also worried about the raging Delta coronavirus variant.
For July, U.S. benchmark 10-year yields have fallen 23 basis points, the largest monthly decline since April 2020. The yield on U.S. 5-year notes, which have come to reflect monetary policy expectations, has dropped nearly 19 basis points, the biggest fall since March last year.
Friday’s U.S. data showed core inflation rising less than forecast in June, paring back some expectations that the Fed would reduce its asset purchases soon.
In addition, the highly contagious Delta variant has prompted the U.S. Centers for Disease Control and Prevention to reinstitute mask wearing as a precaution against possible transmission of the virus by fully vaccinated people.
Data showed the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.4% in June, or 3.5% in the 12 months through June.
Economists polled by Reuters had forecast the monthly core PCE price index, the Fed’s preferred inflation measure, to rise 0.6% and surge 3.7% year-on-year.
“The weaker-than-expected inflation data will probably affirm the view that the Fed is not moving toward tighter policy anytime soon,” said Zachary Griffiths, macro strategist at Wells Fargo Securities in Charlotte, North Carolina.
In afternoon trading, the U.S. 10-year Treasury yield was down at 1.238%, compared with 1.269% late on Thursday. Canada’s 10-year government bond yield was also lower for the day, hovering near its lowest levels since February.
Gold prices eased, with a firmer dollar curtailing the precious metal’s brief rally spurred by U.S. Federal Reserve Chair Jerome Powell’s reassurance that a rate hike was not on the cards for the time being.
U.S. gold futures settled 1% down at $1,817.20.
Oil prices edged higher, with global benchmark Brent posting a fourth monthly gain, with demand growing faster than supply and vaccinations expected to alleviate the impact of a resurgence in COVID-19 infections across the world.
Brent crude futures for September, which expired on Friday, rose 28 cents, or 0.4%, to settle at $76.33 a barrel. The more active contract for October ended the session up 31 cents at $75.41 per barrel.
U.S. West Texas Intermediate (WTI) crude futures rose 33 cents, or 0.5%, to end the session at $73.95 a barrel.
Both benchmarks notched gains of more than 2% for the week, while Brent rose 1.6% in July, its fourth straight monthly increase. WTI was unchanged for the month.
Even with coronavirus cases rising in the United States, all around Asia and parts of Europe, analysts said higher vaccination rates would limit the need for the harsh lockdowns that gutted demand during the peak of the pandemic last year.
“The oil complex has apparently taken a second look at the coronavirus factor in determining that demand will see only a modest reduction, at least one that will prove miniscule in relation to last year’s plunge in consumption,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Analysts pointed to a rapid rebound in India’s gasoline consumption and industrial production following its COVID-19 surge as a sign that economies are more resilient.
Russian Deputy Prime Minister Alexander Novak said oil consumption was increasing across the globe.
“Demand is on the rise, consumption is on the rise. Of course, the coronavirus is still there but ... there are no such lockdowns as there were before,” he told reporters.
U.S. oil giants Exxon Mobil and Chevron reported earnings, and their guidance indicated the market should remain tight, analysts said.
Volume on U.S. exchanges was 8.86 billion shares, compared with the 9.74 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.58-to-1 ratio favored decliners. The S&P 500 posted 65 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 84 new highs and 98 new lows.
Read more: Stocks that saw action on Friday - and why
With files from Reuters
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